Draft taxation amendments business-friendly: Kadin

Rendi A. Witular and Urip Hudiono, The Jakarta Post, Jakarta

The recently completed draft revisions of the tax legislation have been hailed as business-friendly as they offer relatively low tax rates while encouraging better compliance among taxpayers.

Indonesian Chamber of Commerce and Industry (Kadin) chairman Mohamad S. Hidayat told The Jakarta Post on Wednesday that the draft amendments offered incentives that would not only stimulate the economy but also help expand the tax base as a result of the introduction of a simpler taxation regime.

"In general, we are satisfied with the draft amendments although several of our submissions were turned down by the government. There was give and take during the drafting process and we are comfortable with that," he said.

Hidayat pointed to a number of incentives in the draft amendments that could help revive the real sector -- including a plan to scrap the 10 percent value-added tax (VAT) on unprocessed agricultural produce and a reduction in the income tax rate for micro and small businesses from the current maximum of 30 percent to 10 percent.

Another incentive that found favor with the business community was the proposed introduction of a tax amnesty in one of the amendments, which was aimed at improving taxpayer compliance, especially in the corporate sector, he added.

The tax amnesty plan, which is one of the government's top priorities, was initiated by Coordinating Minister for the Economy Aburizal Bakrie, himself a former Kadin chairman. The influential business lobby group has been promoting the idea of offering a tax amnesty for the past three years as part of its proposals for comprehensive tax reform.

The Ministry of Finance's Directorate General of Taxation recently completed reviews of the Tax System Law (No. 16/2000), the Income Tax Law (No. 17/2000) and the VAT and Luxury Tax Law (No. 18/2000).

Hidayat said the government had accommodated the interests of the business community by inviting a team from Kadin to participate in the drafting of the amendments, with the views of the team actually being listened to this time around.

The members of the Kadin team included former finance minister Bambang Subianto, who held office during the administration of former President B.J. Habibie, and senior accountant John Prasetyo.

According to Hidayat, among the proposals by Kadin that were stymied by the tax office was one for compensation should the tax tribunal accepted a taxpayer's complaint.

The directorate also thwarted Kadin's proposal for the institution of equality before the law, which would mean that tax officials would be treated in the same way as taxpayers in criminal prosecutions involving tax issues.

Meanwhile, Minister of Finance Jusuf Anwar said that although the proposed amendments would result in a temporary loss of tax revenue, the government was confident that this would eventually be compensated for by increased investment.

"If you want to fish, you have to provide some bait. And what is the bait (to attract investors)? It involves providing a favorable business environment, including business-friendly tax policies," he said.

"The government is aiming to convert the taxation, and customs and excise systems into facilitators for trade, industry and investment," he added.